FINANCIAL SERVICES: AGREEMENT ON PENSION FUNDS DIRECTIVE LOOKS DISTANT.

The draft Directive on pension funds was initially tabled by the Commission on October 11, 2000 and seeks to provide a framework to provide a high level protection for the rights of future pensioners, but also to give institutions the leeway to develop effective investment policies.The Presidency is likely to put pressure on certain delegations to support the Commission's proposals, but at the last COREPER meeting there was only a slim majority in favour of the scope of the Directive, with eight delegations voting for the proposal and seven against. Meanwhile, six delegations want the technical provisions to go further than proposed and also want quantitative standards to be set. On the investment rules seven delegations felt that the rules on "prudent man" by the Commission were not sufficient. The draft Directive intends that an IORP should be able manage foreign firms' schemes while applying the prudential rules of the country in which it operates.At present IORPs only operate in three countries; the Netherlands, Ireland and the UK. The delegations from these countries have said that tighter rules than those proposed in the draft Directive would threaten their own schemes.Following the debate at the EcoFin Council, the draft Directive is however, expected to be adopted by the European Parliament's Economic and Monetary Affairs Committee on May 29 ahead of a plenary vote on July 2.The draft Directive is part of the Financial Services Action Plan, that EU Heads of State at the Lisbon Council in March 2000 called to be completed by 2005. The Plan, via a number if Directives, is intended to make Europe's financial markets the most competitive in the world. As with much other such legislation, the road to implementation is going to be long and hard.The proposal concerns institutions for retirement provision that are linked to employment and operate on a funded basis, such as pension funds and life assurance companies when they provide occupational pension products. These institutions are the last major...